NOMQHELE DUBE AND SIPHO NGWENYA: The continent can do so much more for ‘Made in Africa’

According to TradeMap data 2022, intra-African trade accounted for 12.5% of African exports, compared with 32.7% for Asia and 39.1% for Europe. China, as Sub-Saharan Africa’s largest trade partner, imports about a fifth of the region’s raw materials, including crude oil, metals and copper. Simultaneously, China is a major exporter to Africa, resulting in a prevalence of “Made in China” goods in African markets, overshadowing locally produced “Made in Africa” products.

According to Olabisi Akinkugbe from Canada’s Dalhousie University, one factor contributing to the trade imbalance is that despite their abundant natural resources, African countries do not engage in sufficient manufacturing. Instead, the continent relies on countries such as China, the US, Germany, Spain, the UK and Japan to enhance the value of its raw materials. 

The African Continental Free Trade Area (AfCFTA) agreement aims to create a single market for goods and services in the continent, facilitate the free movement of people, and drive economic growth and development. It was negotiated by the AU and signed in 2018 in Kigali, Rwanda. The AfCFTA has 54 signatories and is significant in terms of population and geographic size, encompassing more than 1.3-billion people across the continent.

With the implementation of the AfCFTA agreement gaining momentum, several countries have begun trading activities under this agreement. In 2022, the AU initiated a pilot programme known as the AfCFTA Guided Trade Initiative. Eight countries — Cameroon, Egypt, Ghana, Kenya, Mauritius, Rwanda, Tanzania and Tunisia — were selected to participate based on their completion of legal agreements and submission of product offers.

According to the John Rocha, the SA department of trade, industry & competition trade branch’s Africa bilateral economic relations chief director, 31 countries are scheduled to commence trading under the AfCFTA agreement by the end of 2024.

The AfCFTA is expected to lead to diversification of exports, acceleration of growth and an increase in investment as well as employment opportunities for South Africans. According to the IMF, SA is known to be a gateway for trade and investment in Africa. This is due to its advanced financial markets and infrastructure, and diversified economy. In 2022, SA accounted for 38.4% of intra-African exports, mainly exporting minerals and fuels, electrical machinery, iron and steel, ores and vehicles.

SA’s involvement in the AfCFTA is likely to help increase its exports in Africa and SA could lead in developing regional value chains. This involves not just exporting raw materials but also producing manufactured goods and services for the African market. 

In January the realisation of preferential trading within the AfCFTA came to fruition as SA initiated its inaugural shipment of products under the agreement, exporting goods to Ghana. The goods included forged grinding balls and high chrome grinding media products used by the platinum, gold, ferrochrome, base metal, power generation and cement industries.

As the trade landscape evolves, SA businesses and policymakers must seize the opportunities presented to drive sustainable growth and prosperity. This is because the AfCFTA will be able to provide SA with access to more markets and boost the country’s trade within Africa. In future, potential opportunities between SA and Ghana encompass the export of SA poultry and red meat products. Notably, broiler products make up at least 80% of Ghana’s meat imports.

Given Ghana’s sizeable Muslim population (about 20% of the total population), there are promising prospects for halaal-certified imports from SA. In return, Ghana has the potential to provide SA with cocoa powder and cocoa paste valued at $10m-$15m. In addition, Ghana can offer SA frozen fish, valued at about $20m. There are also opportunities for Ghana to supply shea butter to cater to the growing local demand in SA’s hair care and skin care markets. In 2022 alone imports of shea butter reached 6.4-million kilograms, valued at about $20.4m. 

Agricultural and agro-processing, automotive, pharmaceuticals, and transport and logistics sectors have been identified as potential sectors to increase intra-African trade and production. In 2022 SA’s agricultural exports were valued at R211.1bn — Africa accounted for 37%, with Southern African Development Community (Sadc) countries accounting for 90% of that.

The AfCFTA offers an opportunity to expand agricultural exports beyond Sadc, and key regions include West and East African countries such as Nigeria, Kenya, Senegal and Ghana. 

Increasing intra-continental trade will act as a catalyst for infrastructure development such as roads and ports, ultimately leading to improved economic outcomes across the African continent. 

• Dube is an analyst, and Ngwenya an intern, with strategic research and advisory consultancy Birguid.